Risk Appetite Returns!
By Mike Conlon | February 16, 2010
The markets are back to “normal” after some being closed for various holidays. Risk appetite is the play today, as the Euro is rebounding against the dollar on thoughts that the Euro may have slid “too far, too fast”. Also, news out of Australia from the Reserve Bank minutes hinted that further rate hikes were in order should the Australian economy extend its recovery.
Also to note is that commodity prices are higher as which is consistent with an increase in risk appetite.
On to the currencies:
Aussie (AUD): The Aussie is higher on new from the RBA minutes. Analyst expectations are for the Aussie to gain to .91 vs. USD by the end of March. Should the economy continue to expand, then further rate hikes could be in order. The current benchmark rate is at 3.75%, making the Aussie a popular destination for carry trades.
Kiwi (NZD): The Kiwi is moving in tandem with its South Pacific partner the Aussie. While growth has not been as robust in New Zealand, the Kiwi will also benefit from increased commodity prices and a higher benchmark interest rate as well. That rate is currently 2.5%.
Loonie (CAD): The Loonie is trading higher this morning on the risk trade as well as the fact that oil is back over $75. Canada is in the spotlight right now as host of the 2010 winter Olympics as sometimes they get lost in the shuffle in the risk trade hierarchy. The Loonie is up to 1.043 vs. USD this morning, its highest level this month.
Euro (EUR): The Euro is higher against all but the commodity currencies, paring back some of its losses from the previous week. There is tough talk coming from the EU finance ministers regarding Greece, as news has surfaced that Greece may have used derivatives to “fudge the numbers” in order to gain entry to the EU. The fact that Goldman Sachs was involved should come as a shock to no one. Also contributing to the Euro gains this morning is the reading from the German Sentiment Index this morning which was lower than previously reported, but ahead of analyst expectations which net-net is positive for the Euro.
Pound (GBP): The Pound is lower this morning across the board as consumer prices rose 3.5% from a year earlier. A deviation of more than 1% from the target rate of inflation (2%) requires a letter from BOE Governor King as to how he intends to get back to the goal rate. Inflation volatility is to be expected, and this reading was not a surprise to analysts. This could put more Quantitative Easing back on the table for the UK, which would be Pound negative.
Dollar (USD): The Dollar is down this morning as risk-taking is the flavor of the day and stock futures and commodities are higher. The dollar is down 1% vs. the Kiwi and Aussie.
Yen (JPY): As is expected on a risk-taking day, the Yen is down against all but the Pound as the threat of deflation keeps rate hikes off of the table and provides the fuel for carry trades in Aussie and Kiwi despite the good GDP numbers from yesterday.
In overnight markets, the Nikkei closed higher but the Hang Seng closed lower. European markets are higher as are US stock market futures. Oil is back over $75.25 (+1.5%) and gold is up to around 1115 (+1.38%).
As you can see, there is always something happening in the currency market that can influence sentiment and thus market direction. Following the news is extremely important in understanding how market participants view world events.
Do you want to be a market participant? Get started today!
To learn about how world events can affect all markets, be sure to check out our currency trading courses!
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Quiet Day Today!
By Mike Conlon | January 18, 2010
Without the benefit of the US stock market trading today, the currency market is meandering around, trying to decide which way it wants to go. It appears as though there is slight risk-taking, with the commodity currencies up vs. the US dollar (USD) as traders re-establish positions that they had taken off for the long weekend. The Euro is also weak, but up marginally against USD.
While there appears to be heightened risk in the world markets, the dollar is not responding that way– yet. This week all eyes will be on the quality of US earnings reports, as well as any news out of the Euro Zone in regards to the mounting situation in Greece.
This week is somewhat quiet as far as news events go, with the Bank of England policy meeting minutes, Canadian CPI, and the US Philly Fed highlighting the potential market movers.
When the US markets reopen tomorrow, I expect to see risk-taking trends continue unless/until some news hits the tape. But without decent volume today, I’m on the sidelines.
I’m actually going to do some testing of some automated trading systems we are going to be offering so stay tuned for teh results!
To learn more about the forex markets, be sure to check out our currency trading courses!
Tags: bank, commodities, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, EUR, Euro, fed, forex, forex market, fx, fxedu, Il, meeting, Mike Conlon, minutes, news, stock, trade, trader, trend, USD, volume
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Non-Farm Payrolls Disappoint!
By Mike Conlon | January 8, 2010
The US Non-Farm Payrolls Report (NFP) is usually one of the biggest market moving numbers in the currency markets. Today’s number is no exception. The report came in for December at -85K, a very disappointing figure. Estimates were expecting this number to be flat, that we neither gained or lost jobs for the month. Although I had seen some pretty wild numbers tossed around, anywhere from +/- 200K. The revisions for the prior two months showed a net loss of 1K jobs, a negligible but encouraging figure.
So what does this all mean? Well in a word: trouble.
The US economy is not adding jobs nearly as quickly as the government had hoped. With all of the enormous amounts of stimulus spending, we have little to show for it. As a result of this figure, the US dollar reversed course and immediately began to weaken. If anyone had any delusions about a US rate hike in the first quarter of the year, they can pretty much forget about it as its now off of the table. Unless the dollar tanks so badly that Bernanke HAS to do something.
My guess is that we’re going to be looking at Japan 2.0 here in the US, our own version of their “lost decade”.
Just to illustrate the volatility that can occur around this figure, take a look at this chart of EUR/USD: (click chart to enlarge)
Close to 100 pips in a few minutes!
This could make an interesting year for the US dollar. There are 2 basic ways that we will see dollar strength this year; either through interest rate hikes or risk aversion plays. So while this logic may be a bit counter-intuitive to some, it’s going to be very important to take our clues from the other markets to see which theme is playing out.
And of course don’t forget that the dollar can continue to weaken well into this year, the question is going to be that if things don’t get better on the employment front, at what point does that filter through to the other markets?
Only time will tell.
To learn more about how these government figures can affect your savings, be sure to check out our forex trading courses!
Tags: Bernanke, blog, cad, course, currenc, currency, currency market, dollar, economy, EUR, eurusd, forex, forex trading, forextrading, fx, fxedu, Il, interest, interest rate, Japan, Mike Conlon, minutes, nfp, payrolls, pip, pips, time, USD
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Yen Update!
By Mike Conlon | November 27, 2009
Just before I left on Wednesday for Thanksgiving, I noted on blog really quickly that the Japanese yen (JPY) was at a 10-year high to the US dollar. Well that was just the start of it. Let’s take a look at Wednesday’s chart of USD/JPY and a 5-minute chart of this pair when the Dubai news came out. (click charts to enlarge)
As you can see from the charts, this pair made a tremendous move in a matter of minutes! Yen strength occurs because of its pecking order in the risk-aversion trade. This weekend will be very important to find out if there is any contagion of this problem in Dubai– meaning if this is an isolated incident or is it going to affect the banks and world markets in general.
Stay tuned!
Tags: bank, blog, charts, dollar, Dubai, forex, forextrading, Il, Japan, jpy, market, Mike Conlon, minutes, pair, RSI, trade, USD, Yen
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See What I Mean?
By Mike Conlon | September 23, 2009
It looks like the FED did as was expected and the market was kind enough to follow suit, by selling the dollar and buying up other currencies. But see what I mean about the volatility! Take a look at this 5-minute chart of EUR/USD. (click chart to enlarge) Over 60 pips in less than a few minutes!
Hopefully readers you took my advice and sold USD bought other currencies, or steered clear of the mayhem all together!
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Tags: account, blog, currenc, currencies, currency, dollar, EUR, fed, forex, forex trading, forextrading, fundamental, fx, fxedu, Il, market, Mike Conlon, minutes, mywealth, pip, pips, practice, spot, time, USD
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Rumors of more Swiss Intervention in EUR/CHF. U.S. Weekly Unemployment Claims Improve!
By Sean Hyman | July 9, 2009
Rumors of Swiss (SNB) intervention catapulted EUR/CHF upward about 60 pips within minutes. Also, the U.S. Weekly Unemployment Claims was quite a bit lower than last time and lower than expectations. So that’s a great improvement. Unemployment Claims came in at 565k vs. 608k expected and 617k the previous month.
Tags: CHF, EUR, fxedu, intervention, lower, minutes, mywealth, pip, pips, Sean Hyman, Swiss, time, U.S., unemployment
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Alert: BOE holds rates unchanged at .50%! Pound rallies!
By Sean Hyman | July 9, 2009
Alert: BOE holds rates unchanged at .50%! Pound rallies! GBP/USD up about 75 pips within minutes!
Tags: alert, BOE, dollar, fxedu, gbp, Hyman, minutes, mywealth, pip, pips, pound, rate, Sean, Sean Hyman, USD
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What is the biggest “market moving event” of the month typically?
By Sean Hyman | June 5, 2009
NFP: Non-Farm Payrolls in the U.S.
This event draws traders like bugs to a light.
However, it’s not always the most prudent thing to trade, especially for newer traders. Why? The volume can be thin before and during the event and even up to about 30 minutes to an hour or so afterwards.
You see, the big banks usually stop making new trades in the marker WELL BEFORE the NFP announcement because they don’t want to put on their huge trades (usually a billion units or more, no lie) right before an “unknown” like this. The pros aren’t much on gambling on what they don’t know and can’t quantify.
No, they want to know what they are facing before placing trades. So since the “big boys” are out of the picture, so is a lot of the “huge” fx volume that we’re all so accustomed to most of the time.
Why the huge draw to NFP? Because, since the volume is thin and the numbers can routinely come out well off of expectations, it set up an environment for huge pip moves. Take a look at the last NFP for EUR/USD. This pair normally moves an average of 180 pips over 24 hours right now. However, upon the NFP announcement, it moved well over 215 pips.
If you dare to trade this event…be aware that you should trade FAR FEWER lots than you normally trade…and stops would have to be wide. Be comfortable with the potential dollar loss that could happen and make sure it is no more than 5% OR LESS of your account equity. Get a demo to trade, here: http://www.fxedu.com/practice-forex-account
Tags: account, bank, blog, demo, dollar, EUR, forex, forextrading, fx, fxedu, Hyman, lot, minutes, nfp, pair, payrolls, pip, pips, practice, Sean, Sean Hyman, time, trade, trader, trades, U.S., USD, volume
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Be aware of news events, even if you’re strictly a technical trader!
By Sean Hyman | June 5, 2009
Whether you’re a news trader…or a fundamental trader…or a technical trader (and don’t so much care about the news or fundamentals), you’d still better be aware of what’s happening and when it’s happening. Why?
Because you can get caught off guard if you’re not careful and a pair will spike very hard within minutes and you wouldn’t know why.
Take for instance, as of this writing, the Non-Farm Payrolls for the U.S. are expected to come out. They come out at 8:30am EST typically on the 1st Friday of the month. (A few times a year it’s the 2nd Friday of the month). This is probably the most widely watched news event out there. Thus, it can be one of the biggest “market movers” all month long. So you can see where you’d want to be aware of this.
How can you know what other events are important to be aware of? Check out Forex News | Forex Trading News | Currency Trading News and go to their calendar page. Then look for anything marked “high”. That means there is a high probability of it being a “market moving” event because it’s high in importance. That way, you don’t have to be a pro to know what news may be important to the currency market. You can simply scan for the “high” events and be aware of when they come out. This way, you can avoid a new entry right before an event if you want to…or you can close out all or part of your order ahead of the event…or you could simply tighten up your stop a bit more around these times.
Any of these could be ways to defend your account equity right before these events come out. You see, while technicals on the charts do take into account ‘all knowns”…data that is unknown can’t fully be factored on. Once the data is known, the technicals can factor them in quite quickly. However, by that time, damage could have already been done to your account balance. Click on the visuals to enlarge them.
Sean Hyman
www.forextradingblog.com
Tags: account, blog, charts, currency, currency market, currency trading, dailyfx, data, forex, forex news, forex trading, forextrading, fundamental, Hyman, minutes, pair, payrolls, Sean, Sean Hyman, technical, time, trade, trader, U.S.
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Fed Comments!
By Sean Hyman | May 20, 2009
Click on the image to enlarge it. Then you can see the latest Fed comments from today’s release. 
Tags: comments, currency, fed, Federal Reserve, forex, minutes, news, release, Sean Hyman
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